Moving to a new house is a big decision for many homeowners. Yet, the question always arises of what to do with their previous homes. While some may prefer to sell the property, renting it out is also a viable option that can sometimes be overlooked.
Depending on the property market in your area, you may face some level of difficulty in selling your old home. Perhaps you’ve been unable to get the right price for your property or the market mainly consists of renters. Though renting the property may seem like a daunting task, it might be the best alternative in such a situation.
In this article, we discuss why you may want to consider renting your old home as opposed to selling it, and the benefits you’ll stand to gain as a landlord.
Consistent Passive Income
According to previous studies, renters in the United States make up about 34.4% of the entire population. This means there is a great market for rental properties around the country. As an investment, rental real estate can provide passive income to homeowners well into the future.
For this reason, many homeowners opt to invest in real estate as a retirement strategy rather than other alternatives such as stocks. The consistent cash flow can open up opportunities for investors to expand their portfolios, not to mention an increase in purchasing power.
However, preparing your home for the rental market can be a time-consuming process. Activities such as marketing, property maintenance, property showings, and preparation of the lease are necessary when finding a new tenant. Yet, with the right set of tools or a dependable property manager, this turnover period can be effectively minimized.
A Rental Property Can Cover Your Mortgage Payments
Do you have an outstanding mortgage balance on your home? Turning your previous house into a rental can help you cover those payments and provide you with additional cash flow. This can be done by diverting the monthly rental income toward your mortgage repayment.
Thus, you’ll no longer need to go out of pocket to make the monthly payments. One of the main advantages of this is having an additional source of income once the house is fully paid off. Rental property has the potential to provide long-term income for personal use, cash savings or to grow your portfolio.
The Demand for Rental Housing
Over the years, there has been a growth in demand for rental housing across the country. This demand has been increasing since the housing bubble burst, with tenants in different parts of the country seeking to move to larger and more comfortable rental homes.
For landlords, this translates to higher rental income, depending on the level of demand in that particular area. The high demand and low supply of rental housing means that landlords can charge a higher rent that reflects the market conditions. This can not only expand your revenue, but it can also increase the value of your property.
Multiple Tax Benefits
There are a number of tax write-offs that the IRS offers to landlords and rental investors. These advantages can be utilized to lower an individual’s tax liability. However, to gain access to them, you’ll need to maintain a good record of your property-related transactions.
As a landlord, you’ll need to stay up to date with the operating expenses to get the available tax breaks. This means having physical or digital copies of transactional documents such as receipts and invoices. These records will come in handy when you need to show proof of the property’s annual expenses.
Some of the tax breaks availed by the IRS to landlords and rental investors include real estate taxes and interest paid on the mortgage. One can also deduct the property’s operating expenses such as maintenance costs, insurance, property utilities and HOA fees.
In addition, landlords and rental investors are allowed to deduct the property’s depreciation from their tax obligations.
Depreciation results in loss of value over time and should thus be calculated using the value of the structures, and not the land itself. The modified accelerated cost recovery system (MACRS) allows depreciation for a period of only 27.5 years.
Having The Option To Return
Renting out your previous house can provide you with the alternative to move back to your old neighborhood should there be a change in circumstances.
Many homeowners become absentee landlords due to changes in their career or for personal reasons. In such situations, these individuals prefer to maintain their old house as a second home rather than selling it.
By renting to responsible tenants, your property will still be in good condition if you ever decide to move back. As an added bonus, you won’t have to pay a higher price when there’s an increase in property values.
However, before moving back, you should refer to the local and state housing laws and honor the terms of the lease with your current tenant.
You Can Outsource the Management of Your Previous Home
One of the challenges faced by new landlords is learning how to properly manage their rentals and keep their tenants happy. Yet, when it comes to rental real estate, you don’t have to handle the responsibilities on your own. You can hire a professional property manager to help you navigate the journey of rental investment.
A dependable property manager provides vital services such as property marketing, tenant screening, lease preparation, maintenance, and rent collection.
These services will increase the value of your investment and maximize your returns. Thus, you can enjoy a reliable source of passive income without having to worry about the condition of your investment.
When homeowners relocate, selling their old homes is often seen as the most suitable option. However, renting the property rather than selling can have greater long-term benefits such as an additional source of income. It is also important to consider the local market conditions and whether it favors selling or renting your property.
Here at Keyrenter Jacksonville, we have a good understanding of the Jacksonville, FL rental market and can help you along your journey as a new landlord.
Our team of highly qualified property managers will maintain your property in peak condition, giving you the best possible returns. Get in touch with us today for unparalleled management services in the greater Jacksonville area.